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Carborundum Universal (CU)
Others
Good results; driven by commodity business. CUMI’s reported EBITDA at Rs1.18 bn
was 18% higher than our estimates. The surprise is led by the electro-mineral (EM)
division which reported sequential improvement of 8% in EBIT margins. Within the EM
division, increase in profitability was led by VAW (Russia) which benefitted from price
increase taken in 1QFY12. Value added business (part of standalone results) in EMs
reported flat profit (EBIT) qoq. We are upgrading our estimates and our rating to ADD
(REDUCE earlier) with a target price of Rs180.
Good results; driven by the commodity part of electro-mineral division
CUMI reported 2QFY12 consolidated revenue at Rs5.28 bn (+23% yoy; +10% qoq), 5% higher
than our estimates. Reported EBITDA (consolidated) at Rs1.18 bn (+42% yoy;+20% qoq) was
18% higher than our estimates. Better-than-expected performance of partly owned subsidiaries
(reflected in higher minority interest) and lower tax rate led to 26% outperformance (2QFY12 PAT
of Rs656 mn) versus estimates at the PAT level. We make the following observations:
�� Outperformance of the company is driven by the EM division where EBIT margins improved by
8% qoq. Reported EBIT margins at ~29% in 2QFY12 were the highest in the past three years
(24% in 2QFY11 was the highest so far). Within the EM division, improvement in margins is led
by the commodity part of the business (VAW Russia). VAW had taken a price increase in
1QFY12 which has played out in this quarter. The value-added part of the EM business, a part
of standalone results, saw flat profits (Rs150 mn) qoq at the EBIT level.
�� In the rest of the business, the ceramics division reported 2QFY12 EBIT at Rs269 mn (+80% yoy;
+20% qoq). The abrasive division reported flat profits (EBIT) qoq at Rs 302 mn (+23% yoy; -6%
qoq).
�� The company continues to surprise on the EBITDA margins front. Reported margins (consol) at
22.8% in 2QFY12 are the highest in the past three years. EBITDA margins have been
consistently improving in the past several quarters. Qoq improvement in EBITDA margins is led
by higher gross margins as RM/Sales declined qoq from 33.7% to 31.4% in 2QFY12. Most of
the benefit on the gross margins front is led by the price increase taken in VAW in 1QFY12. At
the standalone level, EBITDA margins remained flat qoq (21.3% in 2QFY12 versus 21.8% in
1QFY12.
Revising our estimates upwards; upgrade the stock to ADD from REDUCE
We have revised our estimates upwards to factor in the outperformance in 2QFY12. Our revised
estimate of PAT in FY2012E, FY2013E and FY2014E is ~15% higher than our earlier estimates. We
are upgrading the stock to ADD from REDUCE with a revised target price of Rs180 (Rs145 earlier)
at 14X FY2013E EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Carborundum Universal (CU)
Others
Good results; driven by commodity business. CUMI’s reported EBITDA at Rs1.18 bn
was 18% higher than our estimates. The surprise is led by the electro-mineral (EM)
division which reported sequential improvement of 8% in EBIT margins. Within the EM
division, increase in profitability was led by VAW (Russia) which benefitted from price
increase taken in 1QFY12. Value added business (part of standalone results) in EMs
reported flat profit (EBIT) qoq. We are upgrading our estimates and our rating to ADD
(REDUCE earlier) with a target price of Rs180.
Good results; driven by the commodity part of electro-mineral division
CUMI reported 2QFY12 consolidated revenue at Rs5.28 bn (+23% yoy; +10% qoq), 5% higher
than our estimates. Reported EBITDA (consolidated) at Rs1.18 bn (+42% yoy;+20% qoq) was
18% higher than our estimates. Better-than-expected performance of partly owned subsidiaries
(reflected in higher minority interest) and lower tax rate led to 26% outperformance (2QFY12 PAT
of Rs656 mn) versus estimates at the PAT level. We make the following observations:
�� Outperformance of the company is driven by the EM division where EBIT margins improved by
8% qoq. Reported EBIT margins at ~29% in 2QFY12 were the highest in the past three years
(24% in 2QFY11 was the highest so far). Within the EM division, improvement in margins is led
by the commodity part of the business (VAW Russia). VAW had taken a price increase in
1QFY12 which has played out in this quarter. The value-added part of the EM business, a part
of standalone results, saw flat profits (Rs150 mn) qoq at the EBIT level.
�� In the rest of the business, the ceramics division reported 2QFY12 EBIT at Rs269 mn (+80% yoy;
+20% qoq). The abrasive division reported flat profits (EBIT) qoq at Rs 302 mn (+23% yoy; -6%
qoq).
�� The company continues to surprise on the EBITDA margins front. Reported margins (consol) at
22.8% in 2QFY12 are the highest in the past three years. EBITDA margins have been
consistently improving in the past several quarters. Qoq improvement in EBITDA margins is led
by higher gross margins as RM/Sales declined qoq from 33.7% to 31.4% in 2QFY12. Most of
the benefit on the gross margins front is led by the price increase taken in VAW in 1QFY12. At
the standalone level, EBITDA margins remained flat qoq (21.3% in 2QFY12 versus 21.8% in
1QFY12.
Revising our estimates upwards; upgrade the stock to ADD from REDUCE
We have revised our estimates upwards to factor in the outperformance in 2QFY12. Our revised
estimate of PAT in FY2012E, FY2013E and FY2014E is ~15% higher than our earlier estimates. We
are upgrading the stock to ADD from REDUCE with a revised target price of Rs180 (Rs145 earlier)
at 14X FY2013E EPS.
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